Should You Invest in the Long Tail?

Abstract

The blockbuster strategy is a time-honored approach, particularly in media and entertainment. When space is limited on store shelves and in traditional distribution channels, producers tend to focus on a few likely best sellers, hoping that one or two big hits will carry the rest of their lists. But online retailing and the digitization of information goods have changed the commercial landscape: Virtual shelf space is infinite, consumers can search through innumerable options, and the marginal cost of reproducing and distributing products is low. What does that mean for the blockbuster strategy? In his 2006 book, The Long Tail: Why the Future of Business Is Selling Less of More, Chris Anderson, editor of Wired magazine, argues that the sudden availability of niche offerings more closely tailored to their tastes will lure consumers away from homogenized hits. The "tail" of the sales distribution curve, he says, will become longer, fatter, and more profitable. Elberse, a professor at Harvard Business School, set out to investigate whether Anderson's long-tail theory is actually playing out in today's markets. She focused on the music and home-video industries-two markets that Anderson and others frequently hold up as examples of the long tail in action-reviewing sales data from Nielsen SoundScan, Nielsen VideoScan, the online music service Rhapsody, and the Australian DVD-by-mail service Quickflix. What she found may surprise you: Blockbusters are capturing even more of the market than they used to, and consumers in the tail don't really like niche products much. Elberse outlines the implications of her research for producers and retailers, and offers strategic advice to both groups.

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